Logistics play a significant role in ensuring efficiency and cost margins in retail businesses. The competitive retail scenario, rapidly changing consumer preferences, diversified retail formats, as well as retail stores spread far and wide, are some of the factors contributing to the increased efficiency in retail logistics. Logistics involves managing the flow of merchandise as well as information related to the movement of goods. A retailer can have either own logistics arrangements (in-house logistics) or hire some other company for logistics services (outsourcing of logistics activities). In order to increase efficiency in their supply chain, companies are increasingly going for logistics outsourcing. Transportation is an essential part of logistics for maintaining flow of goods between manufacturers, suppliers and retailers. The infrastructure available for moving goods from one place to another in India includes roads, railways, airways and ports.
Need for efficient logistics
Before doing an in-depth analysis of logistics, let us first glance through the need of good logistics system in India:
- Ensure coordination: To ensure perfect coordination with in various units of a retail venture like suppliers, manufacturers, and vendors.
- Perfect timings: To ensure that consumers get the right product at the right time and at the right place.
- Continuous supply: To ensure efficient supply to retail stores across various geographic areas is seamless and consistent.
- Continuous growth: To achieve profitable and sustainable growth of retail operations in the long run.
- Optimum inventory: To achieve optimal inventory levels and reduce wastage of products.
Modern day retail logistics mechanism is something more than transportation and storage. An efficient retail logistics for retailers ensures competitive advantage, and its scope now includes plans and processes that allow the back end to effectively meet consumer demand.
Role of logistics
- Inbound and outbound transportation: It means transportation of goods from manufacturers to retailers with in the country or outside the country.
- Warehousing: Logistics plays a very crucial role in the storage of the goods and merchandise in a warehouse, as it is the logistic company that has picked the goods from the manufacturer to be delivered to the retailers.
- Packaging and labeling: The packaging and labeling of the goods is also the responsibility of the logistic company.
- Shipment consolidation: In case the shipment mode of transportation is used for the transfer of goods, then again it is the responsibility of the logistic company to get it arranged.
- Tracking/Tracing the products: In case of any mishap or loss of products then tracing and tracking the goods is again the logistic company’s responsibility.
- Inventory management: The logistics also play a significant role in managing the inventory.
- Distribution of merchandise: Once the logistic company has picked up goods from the manufacturer, then again it is the responsibility of the logistic company to get it delivered and distributed to different retailers.
The efficiency and effectiveness of supply chain and logistics management can be understood by the fact that modern retail stores maintain lower inventories than traditional retail. In India, the traditional kirana stores keep around three weeks inventories, while modern retail store like Food Bazaar keep stocks for less than two weeks. Big retailers in India like Future Group with retail stores like Big Bazaar and Pantaloons are making lots of efforts to improve the efficiency and effectiveness of supply chain and logistics. The Future Group launched ‘Future Logistics’ initially aimed at handling the supply chain logistics of the group. Due to good scope in logistics, the company is now looking to offer its services to its 1000 plus vendors. In a country like India, where most retail stores are located in the heart of the city—where rents are high and storage space is scarce, supply chain management has even more serious business implications.
Challenge for logistics
Major challenges in logistics include safety of goods during transportation and keeping up with time limits. The situation of infrastructure and transportation is not so good in India and so the companies are not able to make the best use of their logistics. Another challenge is managing the damaged or unwanted merchandise which is returned by the consumers. Reverse logistics involves all modes of transportation which are used by the retailers to send back the returned goods back to the manufacturers. A retail company should recognise the value of having a reverse logistics management system in place to keep goods on the retail shelf fresh and in demand.
Good logistics help achieve profitable growth and win the faith and loyalty of the consumers. Thus, retailers, consider logistics an important tool to help their business achieve high sales growth. After all, for retail business, ‘Consumer is the King’ and the goal of retail logistics is to work consistently towards achieving optimum consumer satisfaction.